EDITORIAL: Oil slump will affect region, state taxes

Published 4:00 am, Monday, August 3, 2015

The ongoing decline in gasoline prices has been a real boost to consumers. They're saving real money every time they fill their tanks, money that can go to other needs and wants.

Yet there's a flip side to the good news, one that's being felt in oil-producing and refining states. Lower prices for a gallon of gasoline come from lower prices for a barrel of oil. That means it's no longer profitable to search or drill for oil in marginal locations.

Because of that, the big oil companies are announcing big layoffs. Last week Royal Dutch Shell, while noting that profits fell 25 percent in the second quarter, said it would cut its global workforce by 6,500 jobs. Chevron is laying off 1,500 workers.

And on and on. That ripple effect will spread throughout the oil industry, affecting geologists, parts suppliers, truck drivers, etc.

And it's going to get worse before it gets better. The recent agreement on Iran's nuclear program, if implemented as expected, will put Iranian oil on the international market for the first time in years. Considering that oil supplies already exceed demand, it doesn't take a math major to figure out that oil prices will remain flat - or drop even more.

Texas is going to be hit harder than any other state. And since most oil-industry jobs pay well, the drop will be noticed. Jefferson, Hardin and Orange counties will also see lower tax revenues as oil-related valuations decline.

State and county officials have to face up to this reality. This summer, county commissioners are planning their budgets for the next fiscal year. They have to scale back, even if it means some layoffs, which has already happened in Hardin County.

Eventually, oil prices will rebound. Until that happens, however, governments will have to adjust their budgets accordingly. You can bet that county residents don't want a property tax increase right now to continue business as usual.